Portfolio Allocation Calculator

About Portfolio Allocation Calculator

Calculate and rebalance portfolio allocations. This calculator provides instant results with step-by-step explanations to help you understand the calculation process.

How to use this calculator

1. Enter the current value of the portfolio and the desired allocation percentages.
2. Calculate the target dollar amount for each holding using the portfolio total and each target weight.
3. Compare each target value with the current value to find how much to buy or sell.
4. Review the results and use the rebalance amounts to adjust your portfolio.

The formula explained

• \(target_value\) = the dollar amount a holding should have after rebalancing
• \(total_portfolio_value\) = the full current value of the portfolio
• \(target_weight\) = the desired allocation for a holding, written as a decimal
• \(current_value\) = the holding's present dollar value
• \(trade_amount\) = the amount to buy or sell to reach the target

Step by step method

1. Add up all current holding values to get the total portfolio value.
2. Convert each desired allocation percentage into a decimal weight.
3. Multiply the total portfolio value by each weight to get the target value for that holding.
4. Subtract the current value from the target value to see whether to buy or sell, and by how much.

Worked example

Suppose you have a three-fund portfolio and want to rebalance it to your target mix.

1. Your portfolio totals \(\$10,000\). Your target weights are 50 percent stocks, 30 percent bonds, and 20 percent cash.
2. Compute target values: stocks \(10,000 \times 0.50 = 5,000\), bonds \(10,000 \times 0.30 = 3,000\), cash \(10,000 \times 0.20 = 2,000\).
3. If your current values are stocks \(\$6,000\), bonds \(\$2,500\), and cash \(\$1,500\), then the trades are stocks \(5,000 - 6,000 = -1,000\), bonds \(3,000 - 2,500 = 500\), cash \(2,000 - 1,500 = 500\).

Tips and common mistakes

• Make sure your target weights add up to 100 percent before calculating.
• Use decimal weights, not whole percentages, when multiplying by the portfolio total.
• Check whether the calculator is using current market values, not your original purchase prices.
• If trades are rounded to whole dollars or shares, small leftover differences are normal.

Frequently asked questions